Wednesday, January 04, 2006

Cancellation of NITEL sale; the inside story
By Godfrey Ikhemuemhe

For keen watchers of the privatization process of Nigeria's national carrier, NITEL, the decision of the Presidency to cancel the sale of the National carrier to Orascom Telecom Holdings S.A.E of Egypt did not come as a surprise. To say the least, the entire process was fraught with a lot of inexplicable inconsistencies.
Now how can you explain that a NITEL for which some four years ago procured a license for only its Mobile arm at $265million is now sold for a paltry sum of $256.53 million.
But beyond the prize at which NITEL was sold, Vanguard has exclusive details of the inside information that led the President to cancel the entire deal.
Information available to us indicates that the cancellation resulted from the fraudulent manipulation of the process by agents of the Orascom Consortium to get an unfair lead over its contender, Newtel.
The intrigues, which led to the controversial victory of Orascom in the battle for NITEL, started playing out itself some four weeks ago when Orascom bought 19.3% interest in the telecommunications arm of Hutchison Whampoa Limited of Hong Kong for US$1.3 billion.
Hutchison is a major player in Asia and also has some substantial interest in India one of asia’s large markets. In India Hutchison has a partnership with ESSAR and they operate under the name HutchisonEssar.
Up till December this year, this relationship between Hutchison and Essar did not mean anything to Newtel, but by the second week of December once the deal was signed, it meant a lot to the bid for NITEL for which Newtel had been working on with its partners since December 2004.
For Newtel, to ensure a very strong bid for majority interest in NITEL, it knew that it had to partner with reputable operators around the world. One of the operators it entered an agreement with was ESSAR of India. Essar was strategically positioned to give the Newtel bid a leverage going by its antecedents in India as a notable Mobile operator.
The second technical partner who was part of the Newtel Consortium was Duetche Telecom of Germany, which nominated its Datecon subsidiary to provide support for the Newtel bid.
Now with the purchase of major interest in Hutchison, it meant that Orascom now had a hold on Essar that is partnering with Hutchison in India.
Newtel was not comfortable with Essar on this new scenario and promptly protested to it, saying that they had to review their relationship given the new realities. Essar was said to have assured Newtel that given the period for which thay had worked on the NITEL bid and their commitments to the deal, it was unwise for them to pull out of it just because of the recent relationship between Orascom and its partner in India. The company then renewed its commitment to the consortium and promised to see the deal through.
With such assurances, Newtel was said to have relaxed its reservations and indeed traveled to India a week to the bid to finalise strategies.
But alas Newtel had made a grievous mistake. Essar was to come out with its trump card some 24 hours to the NITEL bid.
Now on the 28th of December, a day to the NITEL final bid, Newtel was to go to Ecobank International to pick up its bid bond, which had already been arranged. But alas when its official got there, the Mananging Director allegedly told them that Essar had just called at the bank to withdraw its membership of the consortium and so it became impossible to issue the bond.
Taken aback by this development, the confused Newtel officials made desperate attempts to get in touch with Essar officials to no avail. Essar officials allegedly became incommunicado. Newtel there and then made a letter to the Bureau for Public Enterprises (BPE), intimating it of the new developments and asking for an extension of the bid date. The BPE however would not bulge, explaining that the process could not be reversed.
It was however on the bid date of 29th December that Newtel official allegedly came face-to-face with Essar officials for the first time where they formally confirmed that they were no more part of the Newtel Consortium.
Newtel immediately prepared a letter apprising the BPE of the new developments before the bid and requested for time to deliver the Bid Bond later that day and to arrange for another operator.
Newtel was therefore allowed into the first Bid process where they bidded US$154.961 million, some US$27 million higher than Orascom’s $127 million bid. The BPE was not satisfied with the bids and so called for a second bid.
However, Newtel second bid which the consortium duly submitted was not opened by the BPE on the claim that the company had not submitted the same controversial bid bond. This opened the way for the acceptance of Orascom’s ridiculous offer of US$256 million for NITEL. This is contrary to the claim by the BPE that Newtel failed to appear for the second round of the bid. Vanguard indeed gathered that Newtel bid that is still with the BPE was to the tune of US$500 million.
As the drama played itself out, it occurred to Newtel that it had been naïve in the amount of trust reposed in its partner Essar after the deal between Orascom and Hutchison. After the bid, it became obvious to the company that Orascom and its Nigerian partners may have used Essar to gather intelligence about Newtel strategy for NITEL and used the information gathered to nail it. They could not reconcile themselves with the fact that the same Essar officials with which they held meetings in India one week to the NITEL bid could come to Nigeria 24 hours before the bid and go straight to their bankers to surreptitiously pull out of the bid process without informing them.
At the announcement of Orascom as the winner of the bid, Newtel had to protest to the BPE, disagreeing with the process that led to the choice of Orascom as winner of the bid. In the protest letter they stated all the intrigues and the scam that was the NITEL bid process, saying that they were schemed out of the process. They had also lamented that a national asset like NITEL had been sold for a paltry sum of US$256 million to a foreign company. The protest got the attention of the Economic and Financial Crimes Commission, which sent its detectives lose of the deal.
Those close to the bid process also put the same facts presented in the protest to the BPE before the President and he was disgusted by what transpired. He therefore ordered a cancellation of the bid.
Newtel is a vehicle put together by some Nigerians for the purchase of NITEL. Other companies in the consortium include Duetche Telecom and Essar.

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